Tax-Credit Education Savings Accounts (ESAs)

Tax-credit ESAs allow taxpayers to receive full or partial tax credits when they donate to nonprofit organizations that fund and manage parent-directed K-12 education savings accounts. Families may use those funds to pay for multiple education-related expenses, including private school tuition and fees, online learning programs, private tutoring, community college costs, higher education expenses and other approved customized learning services and materials, and roll over unused funds from year to year to save for future educational expenses. Some tax-credit ESAs, but not all, even allow students to use their funds to pay for a combination of public school courses and private services.

Do you know which states have tax-credit ESAs? For more little-known truths about America’s tax-credit education savings account programs, visit our tax-credit ESA fast facts.

Because tax-credit ESAs are a new program type, no data is yet available. We can look to original education savings account programs—which aren’t funded through donations to ESA-granting nonprofits, but instead through state funding formulas—to see how parents use their accounts to educate their children. Though many ESA families use their funds to pay for private school tuition, 28 percent spend the money on multiple learning services. Collectively, families even saved 31 percent of total ESA funds and accumulated more than $67,000 in college savings plans in 2016. Our Ed Debit Card study examines parent spending data from the nation’s first and oldest ESA program. Check out our study for more details.

Tax-credit ESAs are very new and very few right now, so data isn’t yet available on parent satisfaction. We can look to original education savings account programs—which aren’t funded through donations to ESA-granting nonprofits, but instead through state funding formulas—to see how satisfied (or dissatisfied) families are with ESA programs. Researchers have surveyed parents who use the longest-running ESA program in the nation: the Arizona Empowerment Scholarship Accounts program. The majority of ESA parents in Arizona are satisfied with their children’s schools, but there is room for states to further improve how these programs work for families. Read more of from this report below.